Friday, January 14, 2011

Market UpDate W/Positive Bond Market Should improve Mortgage Rates

Friday’s bond market has opened in positive territory after this morning’s economic data gave us mixed results. The stock markets are showing minor gains with the Dow up 12 points and the Nasdaq up 5 points. The bond market is currently up 8/32, which should improve this morning’s mortgage rates by approximately .250 - .375 of a discount point over yesterday’s morning rates.

The first of this morning’s four economic releases was December’s Retail Sales data. It revealed a 0.6% increase in sales at the retail level of the economy last month. This is a moderate increase, which is not necessarily good news for the bond market because it means that consumers are spending. However, it was a slightly smaller increase than many had thought, making this somewhat of a favorable report for mortgage rates.
The second key report of the day was December’s Consumer Price Index (CPI). The Labor Department reported a 0.5% increase in the overall reading and a 0.1% rise in the core data. The core data is the more important reading because it excludes more volatile food and energy prices, giving us a more stable reading of inflation at the producer level of the economy. Therefore, this data can be considered neutral to slightly negative for mortgage rates.

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